Companies will move their supply chains out of China after the Covid-19 crisis to minimize the impact from similar shocks that may occur in the future, and they might choose to invest in Vietnam.
According to Mark Mobius, a wave of displacement from China will erupt after the epidemic is under control. At the same time, the supply chain will be less dependent on the world’s second economy. The founder of Mobius Capital Partners also said the pandemic has caused businesses to rethink the way they should do to minimize future supply shocks.
According to Mobius, lot of people are dependent on supply chains in China. However, they are becoming diversified into the supply chain as much as possible. Finding nearby supply chains becomes a new target. There will be some priorities for companies based in the US or regional markets like Mexico and Canada.
However, the diversification of these supply chains will move to places like Vietnam, Bangladesh, Turkey or even Brazil.
Not only Mobius, according to independent analyst Fraser Howie, Governments will seek to reduce their dependence on China, although no country can completely ignore Beijing’s role in supply chains.
Richard Martin of IMA Asia commented that although manufacturers in some industries began moving their operations out of China before Covid-19 broke out, the pandemic would trigger a second wave in which the Nationalism is used to consider supply chain restructuring.
Many industries, such as agri-pharmaceuticals and energy, have been under great pressure amid the global health crisis because of their reliance on economies such as China and logistics constraints. International pressure on the supply chain.
Booming from Wuhan, China in late 2019, Covid-19 has spread across the globe and crippled many economies, including the United States. The social distancing solution to prevent the virus from spreading is applied by a number of countries. The time of re-opening of the economies is still a big question mark when the epidemic has not been controlled yet.
Meanwhile, the price of oil in the US dropped sharply because the crisis led to a situation of supply exceeding demand, causing WTI oil futures delivered in May fell to negative level for the first time. However, low oil prices are a good sign for emerging markets like India and China, the energy importers.
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